In its meeting of May 2, 2012, the Board of the National Bank of Romania decided the following:
- to keep unchanged the monetary policy rate at 5.25 percent per annum;
- to ensure adequate management of liquidity in the banking system;
- to maintain the existing levels of minimum reserve requirement ratios on both leu-denominated and foreign currency-denominated liabilities of credit institutions.
The NBR has examined and approved the quarterly Inflation Report, which will be released to the public in a press conference scheduled for May 8, 2012.
Recent developments in macroeconomic indicators show continuing disinflation in line with NBR forecasts as well as a moderate recovery of lending activity also as a result of the transmission of monetary policy signals during past months. At the same time the persistent aggregate demand deficit as well as lower growth of exports amid a worsening of the short term economic growth outlook in Europe and globally are worth to be noted.
The annual inflation rate fell to 2.4 percent in March from 2.6 percent in the previous month and 3.14 percent in December 2011, while a similar decreasing trend is witnessed by the annual adjusted CORE 21 inflation rate which reached 2.03 percent versus 2.37 percent in the last month of 2011. However, the average growth of aggregate prices over the last 12 months stood at 4.5 percent in March versus 5.8 percent in December 2011.
The aggregate real broad monetary conditions have been permanently calibrated so as to achieve a consolidation of prospects for the inflation rate to continuously remain within the variation band around the target, thus helping the efforts to efficiently anchor anticipations and underpinnings for sustainable economic growth.
The NBR Board has examined and approved the quarterly Inflation Report, a document that assesses developments in the recent macroeconomic environment and the inflation outlook and identifies the main challenges and risks to monetary policy in the period ahead.
The new forecast reiterates the prospects of the annual inflation rate to remain within the variation band around the target throughout the entire forecast horizon despite a temporary unfavorable statistical base effect which is to be expected in the second part of 2012.
The short-term outlook is however affected by significant fluctuations of investors’ risk appetite. This is correlated with changing expectations regarding the economic growth at global level and the impact of the beginning of a deleveraging process by some European Union credit institutions on the economies in Central and Eastern Europe. Domestic developments in the electoral context associated with the above-mentioned issues could heighten capital flow volatility. These risks and uncertainties thus require the maintenance of a prudent monetary policy stance for the aggregate broad monetary conditions in order to ensure an efficient anchoring of expectations with a view towards achieving price stability in the medium term.
In this context, the NBR Board has decided to keep unchanged the monetary policy rate at 5.25 percent per annum, to ensure the adequate management of liquidity in the banking system and to maintain the existing levels of minimum reserve requirement ratios on both leu-denominated and foreign currency-denominated liabilities of credit institutions.
The NBR restates that achieving price and financial stability objectives in the context of the continued fulfillment of commitments under the external financial accords with the European Union, IMF and other financial institutions is crucial to ensure lasting economic growth in the context of a balanced macroeconomic policy mix.
The NBR Board reaffirms that it will continue to closely monitor domestic and global developments so as by an adequate dosage of its instruments to ensure the fulfillment of its objectives to achieve price stability over the medium term, as well as financial stability.
The quarterly Inflation Report will be released to the public in a press conference scheduled for May 8, 2012. In line with the announced calendar, the next NBR Board meeting dedicated to monetary policy issues is scheduled for June 27, 2012.
1Calculated by the NBR by excluding administered prices, volatile prices, and tobacco and alcohol prices from the consumer price index.
Video (Romanian only):
» Press briefing, 2 May 2012
» Press conference, 8 May 2012 - quarterly inflation report